CCR is just the beginning, says Walgreens CEO

Duane Reade-like beauty, more food to come

CHICAGO — Walgreens’ massive Customer Centric Retailing initiative is transforming the way the company’s stores are merchandised and designed as it rolls into an ever-larger proportion of its more than 7,600 stores across the United States. But it’s only the opening drive in a campaign to “reinvent the customer experience in our stores,” president and CEO Greg Wasson told shareholders Wednesday.

That effort to significantly upgrade customers’ shopping experience “began with CCR,” said Wasson, who dubbed it “a much-needed, low-cost refresh of the majority of our stores.” But the full impact of the transformation — which involves a tighter, faster-turning front-end product mix, improved departmental adjacencies, better signing and other changes — will go far beyond the initial improvements in store appeal, he noted.

“To date, we’ve converted or opened [more than] 2,100 stores to the CCR format, and a little [more than] 28% of the chain,” Wasson said. In those stores, he said, “we’re hitting on all four cylinders of our four-way win, which was to increase total sales, reduce our inventories, increase our store efficiencies ... and, most importantly, to improve the customer experience. This time next year, we will have converted or opened approximately 5,500 [CCR] stores, which is about 73% of the chain,” Wasson added.

With that conversion well under way, “once we’ve moved beyond CCR, we have a lot of exciting opportunities we’ve been piloting and studying that we can now begin to move forward with,” Wasson said. For instance, he added, “We believe we have tremendous opportunity in the front end of our drug stores. We’re expanding our private-brand offering to meet the needs of the new consumer. We’re piloting a loyalty program in three markets across the country, and we also acquired a loyalty program from Duane Reade to help us ... study and capture their learnings as we go forward.”

In addition, Wasson said, “We’re looking to offer a Duane Reade-like beauty department in many stores across our company — we’re testing those in several markets — and we’re expanding our fresh food offering.” That expansion began last summer when Walgreens rolled out several more stores with much larger selections of produce, fresh-prepared foods, dairy products and other groceries in parts of inner-city Chicago that have been called “food deserts” because they lack access to full supermarkets or other healthy-food options.

Chicago now hosts 10 Walgreens fresh-food stores, including at least one unit that reportedly has dedicated 40% of its retail area to food. “By leveraging the drug store locations we have across this country in food deserts, we can become the food oasis in those communities,” Wasson asserted. “We think there’s tremendous opportunity to do good business while we’re there.”

Walgreens, Wasson added, is “in our infancy with this.” But he projected that the company could expand the fresh food centers to 400 or more stores in the next several years.

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